SENATE COMMITTEE ON GOVERNMENT AFFAIRS

MINUTES OF THE

SENATE Committee on Government Affairs

Seventy-First Session

February 12, 2001

The Senate Committee on Government Affairswas called to order by Chairman Ann O'Connell, at 2:00 p.m., on Monday, February 12, 2001, in Room 2149 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator Ann O'Connell, Chairman

Senator William J. Raggio, Vice Chairman

Senator William R. O’Donnell

Senator Jon C. Porter

Senator Joseph M. Neal, Jr.

Senator Terry Care

COMMITTEE MEMBERS ABSENT:

Senator Dina Titus (Excused)

GUEST LEGISLATORS PRESENT:

Senator Lawrence E. Jacobsen, Western Nevada Senatorial District

STAFF MEMBERS PRESENT:

Kimberly Marsh Guinasso, Committee Counsel

Juliann K. Jenson, Committee Policy Analyst

Sharon T. Spencer, Committee Secretary

OTHERS PRESENT:

Irene E. Porter, Lobbyist, Southern Nevada Home Builders Association

James Chachas, Financial Consultant, Hobbs Ong & Associates Incorporated

Ronald L. Lynn, Lobbyist, Clark County

Carole Vilardo, Lobbyist, Nevada Taxpayers Association

Cheryl Blomstrom, Lobbyist, Nevada Chapter Associated General Contractors

Steve G. Holloway, Lobbyist, Associated General Contractors – Las Vegas

Marvin Leavitt, Lobbyist, City of Las Vegas

Richard W. Wilkie, Lobbyist, City of Henderson

Warren B. Hardy II, Lobbyist, Associated Builders and Contractors

Mary C. Walker, Lobbyist, Carson City, Douglas County, Lyon County, Carson-Tahoe Hospital, and Nevada Recreation and Parks Society

A.R. (Al) Shankle, President, Al Shankle Construction

Tom Metcalf, Lobbyist, Builders Association of Western Nevada, and Carson-Tahoe Hospital Board of Trustees

James Keenan, Purchasing Agent, Purchasing, Douglas County

Daniel K. O’Brien, Manager, State Public Works Board

Robin Keith, Lobbyist, Nevada Rural Hospital Project Foundation

Shawn Wiscombe, Administrator, Grover C. Dils Medical Center

Bill M. Welch, Lobbyist, Nevada Hospital Association

Susan Martinovich, P.E., Assistant Director, Engineering Division, Nevada Department of Transportation

Scott Morgan, Director, Community Services/Parks and Recreation Department, Douglas County

Chairman O'Connell opened the hearing on Senate Bill (S.B.) 60.

SENATE BILL 60: Makes various changes concerning limitation on building permit fees charged by local governments. (BDR 31-232)

Irene E. Porter, Lobbyist, Southern Nevada Home Builders Association, was the first proponent of the measure to speak before the committee. She introduced Jim Chachas, Financial Consultant, Hobbs Ong and Associates Incorporated, of Las Vegas. Ms. Porter explained S.B. 60 sought to create an enterprise fund for building permit fees. She said she and Mr. Chachas worked closely with the Department of Taxation as well as other local government agencies to establish regulations that would conform to the appropriate Nevada Revised Statutes (NRS) 354.624 and 354.6241. The intent of the measure was to establish a methodology by which the sufficiency and adequacy of reserves could be determined for building-permit enterprise funds. Ms. Porter said existing law was too general and allowed excessive amounts of money to build up within the fund and remain there unused for long periods of time.

Ms. Porter gave a brief history of how the Southern Nevada Home Builders Association initially became involved in the issue of building permits and enterprise funds. She explained that in 1987, the Nevada Legislature passed a law which allowed the formation of building-permit enterprise funds. The money from these funds was collected from builders in the form of inspection fees, building permits, and other fees, and could be used to operate a building department. The legislation from 1987, continued Ms. Porter, provided that the Nevada Tax Commission was to promulgate the regulations that were to accompany that new law. However, 13 years after the legislation was passed, those regulations had not yet been formulated. Ms. Porter explained the proposed legislation was meant to remedy that problem and she called upon Mr. Chachas to assist by explaining the measure, line by line.

Mr. Chachas explained the measure was necessary because it had been determined there was no clear method provided in NRS 354.624 through 354.6241 for establishing an audit of the monies held in an enterprise fund. Reading from his handout (Exhibit C), he explained the intent of the proposed legislation was to establish a methodology by which the sufficiency, adequacy, and purpose of reserved funds could be determined for building enterprise funds. He said the statute the measure sought to correct was NRS 354.59891, subsection 1, which affected current definitions of various terms pertaining to building permits, current assets, current liability, operating costs, and working capital. Changes were also reflected in S.B. 60, subsection 4, paragraph (a), in which the phrase “fees for building permits,” was replaced with the phrase, “building permit fees,” The phrase, “building permit fees,” as it pertains to building-permit enterprise fund operations, included all sub-permits such as electrical, plumbing, and inspection fees associated with the issuance of those permits, Mr. Chachas said. Subsection 4, paragraph (c), of the bill would establish a base amount for the allowed unreserved working capital balance to an amount not to exceed 6 months operating costs for the program. The current subsection 4, paragraph (c) would be reordered to become subsection 4, paragraph (d). Senate Bill 60 would add subsection 5 to NRS 354.59891, which would establish amounts in addition to the base of allowed unreserved working capital established in subsection 4, paragraph (c), in a local building department enterprise fund. The proposed legislation would include a new subsection 5, paragraph (a), which pertains to amounts sufficient to pay debt service for 1 year.

Mr. Chachas continued explaining the measure by pointing out subsection 5, paragraph (b), would allow an amount equal to the total amount set forth in the capital improvement plan for the current fiscal year pursuant to NRS 354.5945. Subsection 5, paragraph (c), of the bill would allow 4 percent of the annual operating budget to be held in reserve for unanticipated capital replacements. Subsection 6 would exclude from current asset calculation of working capital balances any amounts designated for special use, examples of which would include technology fees and any prepaid fees, such as prepaid inspection fees. Subsection 7 defines the action required of a local government if the working capital balance, as determined by the calculation method previously described, is found to be in excess of the allowed working capital amount for 2 consecutive fiscal years, Mr. Chachas noted.

Continuing his line-by-line discussion of the proposed legislation, Mr. Chachas said local governmental action would be required to reduce the cost of building permit fees in the following year to ensure the balance in the fund did not exceed the amount authorized by subsections 4 and 5. Section 2 of S.B. 60 would make changes to NRS 354.6241 by adding the above enumerated components to the method by which the retained earnings, or working capital, would be determined to be reasonable and necessary to carry out the purposes of the fund. Section 3 establishes the effective date of that action as July 1, 2001.

Senator Care asked how the figures were derived in section 1, subsection 4, paragraph (c), in reference to unreserved working capital within the enterprise fund. Mr. Chachas explained the figures were taken from information provided by the Government Finance Officers Association. The agency recommended balances from working capital reserves should be used to pay operating expenses in amounts sufficient to sustain the fund for from 3 to 6 months.

Senator Porter asked what specific problem needed to be corrected by the proposed legislation. Ms. Porter explained existing law pertaining to enterprise funds was very general. Specific regulations were necessary in order to track expenditure of funds and to provide an adequate form of disclosure. The proposed legislation would also provide a level playing field for local governments as well as provide consistency in operating requirements for building department enterprise funds throughout the state of Nevada.

Senator Raggio asked if the proposed legislation would place any limitations on the purposes for which the building-permit fund could be used. Ms. Porter explained the measure did nothing other than provide for the operation of the building department. Senator Raggio asked if the measure mandated a decrease in the fee charged for building permits in the event the fund exceeded the amount authorized. Ms. Porter answered in the affirmative.

Senator Neal, in summarizing the proposed legislation, stated S.B. 60 restricted the amount local government could place in an enterprise fund and authorized local government to maintain a specific amount of working capital in the fund for specific projects. He asked why it was necessary to limit the amount of money in an enterprise fund. Ms. Porter explained it was necessary to limit the amount only when the fund accumulated an excessive amount of revenue. She said there was no reason for a building department to have millions of dollars sitting idly in a fund while, at the same time, the department continued to charge additional fees for building permits without lowering the cost of fees. Ms. Porter stated governments should not be in the business of making profits from money provided by homeowners and builders. She said it was unnecessary for exorbitant amounts of cash reserves to remain unused.

Senator Neal asked for a definition of an enterprise fund. Mr. Chachas explained an enterprise fund, in this instance, was a revenue reserve established to receive money to administer the total operation of a building department and to provide services, such as building inspections and plan checking. The amount of money in the fund should be sufficient to provide those services, but not in excessive amounts. There are to be no local government general fund monies included in building department enterprise funds, which are to contain revenues generated entirely from building-permit fees. If a county did not have an enterprise fund, all the money would go to the general fund, Mr. Chachas noted. Also, the measure would allow county building departments to be kept whole while limiting the amount of money allowed to accumulate unused in the fund for extensive periods of time. The proposed legislation would require complete financial accountability and disclosure, he said.

Senator Care asked approximately how much money was in the enterprise fund in Clark County for a 6-month period. Ronald L. Lynn, Lobbyist, Clark County, explained the Clark County Building department enterprise fund currently contains a reserve amount of over $10 million. He added that none of the money in the fund goes into the county general fund. Also, Mr. Chachas continued, the money in the fund is only used to cover administrative costs. Senate Bill 60 would create more balanced enterprise funds because the amount of money allowed to remain in the funds would not be allowed to become excessive. The measure would assure that money in the funds would be available to help mitigate the cost of inspections for the public, as well as provide full disclosure and accountability regarding the amounts of money in the funds and how they are used. It would limit, if not curtail, potential increases in the cost to the public for building inspections.

Senator O'Donnell asked if S.B. 60 would change the impact fees accumulated within the water and sewer departments. Ms. Porter responded in the negative, and explained the measure would only affect building department enterprise funds.

Carole Vilardo, Lobbyist, Nevada Taxpayers Association, spoke in support of the measure. She said enterprise funds were not extensively used in building departments throughout Nevada and the measure would create a rational balance between the amount of money held unused within the reserve and the amount of money received in the form of fees paid by developers and builders for administrative expenses. Fees charged by building departments should not increase as long as a reserve remained within the enterprise fund; however, she concluded, there should be a reasonable limit placed on the amount of money held in reserve.

Senator O'Donnell asked if Mr. Lynn anticipated a fee increase in the near future, to which Mr. Lynn responded in the negative.

Chairman O’Connell asked, “If an enterprise fund is self-supporting, would there be any parameters that would allow a building department to use its revenues for other purposes?” Mr. Lynn responded in the negative. He added, the money could be used only for projects related to impacts of building, including plumbing, mechanical, electrical, and other items specific to construction activities.

Senator Porter asked if Clark County Building received any county general fund monies or did it depend on money solely from the enterprise fund. Mr. Lynn said the Clark County department operated solely out of the enterprise fund without general fund revenues. Senator Porter asked if the fund had an end-of- the-year balance, could it be carried over to the next year. Mr. Lynn responded in the affirmative. The Senator then asked if the measure allowed revenue projections to be made. Mr. Lynn again responded in the affirmative.

Cheryl Blomstrom, Lobbyist, Nevada Chapter Associated General Contractors, spoke next in support of S.B. 60. She said the measure was in the public interest because it would help mitigate building costs.

Steve G. Holloway, Lobbyist, Associated General Contractors – Las Vegas, said his group supported the measure because it provided total financial disclosure and accountability. He agreed with Ms. Blomstrom’s remark that the proposed legislation was in the interest of the public because it helped mitigate the cost of building construction.

Marvin Leavitt, Lobbyist, City of Las Vegas, was the next to speak on S.B. 60. He said he had no specific objection to the basic idea of the measure; however, a reserve of cash was needed to provide against slow building periods which could cause a drain on the fund. Presently, under certain circumstances, local governments restrict the amount of cash reserves in building funds. Mr. Leavitt offered several suggestions he said would improve the proposed legislation. One such change was on the first page of the measure, section 1, line 18, regarding the definition of the term “current asset.” He said that term applied to a period of 12 months rather than a fiscal year. Mr. Leavitt also noted line 20 of page 3 of the proposed legislation lacked clarity. He suggested changing the language to read “at the close of two fiscal years,” rather than “at least two consecutive fiscal years.”

Mr. Leavitt pointed out the basic principle for having an enterprise fund was that, over time, revenues received into the fund and the amounts paid out for expenditures equal each other. The fund should not be excessive, he said, but it should be adequate to guarantee sufficient revenues for 9-month rather than 6-month periods. Included in the greater share of expenditures for a building department, he said, is training building inspectors, which is a highly technical job, as well as paying their salaries.

Senator O'Donnell said it would be a problem if someone could not get an inspector to a home or project because revenues in the enterprise fund were insufficient, thus holding up a construction project. However, continued the Senator, there should be historical data available that could be reviewed to determine patterns in construction fluctuations in order to avoid hiring a surplus of inspectors who would be paid for sitting around doing nothing. Mr. Leavitt said the problem could be avoided by overspending, but it would be far better to find a middle ground that would not encourage counties to overspend or go beyond a specified limit to accumulate excessive assets within the enterprise fund. He added he did not object to placing restrictions on local governments or requiring periodic reviews of capital improvement plans.

Senator Neal said the measure called for the total amount of expenditures for operating a building department to not exceed the amount as set forth in a capital improvement plan, the amount of which was not specified. He asked for clarification on that point. Mr. Leavitt pointed out local governments prepared a capital improvement plan approximately once every 5 years. He said the language in the measure stated that for each construction project, an appropriate amount of money would be set aside for operating expenses within the capital improvement plan along with an additional amount for unanticipated capital needs.

Chairman O'Connell asked the sponsors of the proposed legislation if they had a problem accepting any of the suggestions offered. Ms. Porter said her organization had no objection to any of the suggestions offered with exception to the 12-month reserve of revenue. She said that would be an excessive amount and an unrealistic requirement for businesses.

Senator O'Donnell asked Ms. Porter if her organization was in favor of changing the definition of permits in order to encompass all the fees necessary to acquire a building permit. Ms. Porter responded in the affirmative.

The Chairman asked if there was anyone else who cared to speak on the proposed legislation. Richard W. Wilkie, Lobbyist, City of Henderson, came forward with his remarks in support of the measure. He said the measure was good in concept, but because the City of Henderson had a relatively new enterprise fund for their building department he supported at least a 9-month revenue reserve over a 6-month reserve, although a 12-month cash reserve was optimal.

The Chairman asked if there were any further comments. As there were none, the Chairman closed the hearing on S.B. 60 and opened the hearing on S.B. 61.

SENATE BILL 61: Makes various changes to provisions relating to use of design-build teams on public works projects. (BDR 28-99)

Mr. Holloway was the first to speak in support of the measure. He explained he was appearing before the committee as chairman of the design-build contracting legislative interim advisory committee. The committee, as created by Senate Bill 475 of the Seventieth Session, consists of 16 members, including representatives from the cities of Reno, Las Vegas, North Las Vegas, Henderson, and Sparks, Washoe County, Clark County, the Nevada Department of Transportation (NDOT), the Southern Nevada Water Authority (SNWA), and professional building industry-related associations. The committee was tasked with reviewing design-build contracting methods authorized by the 1999 Legislature and to decide, through the consensus process, if changes in the design-build method of contracting public works projects were needed. He explained S.B. 61 was the result of the interim advisory committee’s efforts.

SENATE BILL 475 OF THE SEVENTIETH SESSION: Authorizes public body and department of transportation to use design-build method of contracting in certain circumstances. (BDR 28-517)

Mr. Holloway said framers of the measure have proposed six changes to the design-build method of contracting for public works projects, in order to provide all counties in Nevada the same opportunity Clark County has, as granted by the 1999 Nevada Legislature. The measure also seeks to clarify and standardize both public notification requirements and the public hearing process to provide more consistency in the hearing process, as well as to reduce the number of advertisements required to solicit preliminary proposals. The proposed legislation would also remove the sunset requirement in chapter 338 of the Nevada Revised Statutes. Mr. Holloway provided copies of his statement to the committee (Exhibit D).

Mr. Holloway continued his testimony by explaining the measure line by line. He pointed out his suggested changes in the language of the proposed legislation pertaining to subsection 5 of the measure that states a public body in any county could contract with a design-build team once each fiscal year if the estimated cost of the public work is at least $250,000 but less than $100 million if the project is a water or sewage treatment facility, and if the cost is at least $250,000 but less than $30 million for any other type of public works project. He said, under the statute, any public works entity may contract as many design-build projects as they chose over $30 million or $100 million if the project is a water or sewage treatment facility. Under existing statute, Mr. Holloway continued, a public works entity may contract only one such project each year under the $30-million ceiling. Because of the population stipulation, the statute states, in effect, that any Clark County public works entity could contract one project between $5 million and $30 million, or one $100-million project if that project was a water or sewer treatment facility, Mr. Holloway noted.

Mr. Holloway explained the amendment he was proposing would allow any public works agency in any county in Nevada to do one such project a year under the $30-million threshold amount and to set a floor for such projects at $250,000. The amendment was the only one pertaining to the proposed legislation that did not reflect a consensus among members of the interim design-build committee. He said members of the Associated General Contractors (AGC) in both northern and southern Nevada voted against the proposed threshold. Discussions were continuing, added Mr. Holloway, and he expressed confidence that a compromise proposal to amend the section would be suggested in the near future.

Senator Porter asked for clarification regarding the disputed threshold amounts. Mr. Holloway said AGC members in northern Nevada, in their ongoing discussions, suggested that $2.5 million was an appropriate threshold amount; however, they were willing to discuss the matter further in order to reach a compromise threshold amount.

Chairman O'Connell asked if the smaller counties objected to the higher threshold amounts because those counties did not have many proposed projects that would cost $2.5 million. Mr. Holloway responded in the affirmative.

The second proposed amendment, continued Mr. Holloway, pertained to section 6 which dealt with chapter 338 of NRS, and section 11 which dealt with chapter 408 of NRS. The amendment proposed reducing the number of required advertisements needed to notify the public of hearings on public works issues pertaining to design-build projects. Mr. Holloway explained the proposed amendment would eliminate the requirement that a notice of public hearing be published at least once a week for three consecutive weeks in a newspaper of general circulation within the county the project was being constructed.

Continuing the line-by-line description of the proposed legislation, Mr. Holloway noted section 7 suggested reducing the number and size of advertisements required by law to solicit preliminary proposals on design-build projects. The changes contained in sections 8 and 12 of S.B. 61 dealt with eliminating the 30-day requirement for the selection of finalists and simplifying the requirements for submitting preliminary proposals. A fifth change occurred in sections 9 and 14 and required local bidder preference to be a factor with an assigned relative weight of 5 percent. Also, Mr. Holloway said the legislative interim committee considered the cost of both the design and the construction of each project important factors in the bidding process, and should have a combined assigned relative weight of at least 30 percent toward the selection of the final bid. The final aspect of the proposed amendment, concluded Mr. Holloway, removed the sunset requirements from the design-build provisions of chapters 338, 341, and 408 of NRS. The statute was enacted with a sunset date of October 1, 2003. However, the members of the committee agreed the design-build method was a viable form of contracting public works projects, he said. It was agreed the statute should remain on the books in order to allow counties and other public works entities a method for providing design-build contracting of public works projects.

Senator O'Donnell asked why it was important to pick only one project per year. Mr. Holloway explained the arrangement was a compromise that had been reached between all involved entities. Most design-build projects did not save a great deal of money unless they cost over $20 million or $30 million, he said. Any number of projects could be constructed as long as the total cost remained within the $30-million budget. If a project cost any less, the design-build method of construction would not be cost-effective to the taxpayer. Therefore, it was necessary to limit smaller projects to only one per year. Senator O'Donnell asked if the pilot project to construct only one design-build project per year limited to $5 million had been successful. Mr. Holloway responded in the negative. Only the pilot project in Mesquite had been successful, he added, due to the limited number of construction projects there.

Senator Care asked for clarification of Mr. Holloway’s statement regarding changing current requirements for notification of public works projects, inquiring if the measure had been drafted to bring current law pertaining to design-build projects into conformity with other types of projects. Mr. Holloway responded in the affirmative. He added that existing project notification requirements had been working well for 20 years with approximately 2000 projects ongoing in Clark County in the past year. Senator Care continued his questioning by referring to specific language in the proposed legislation that stated “the date by which preliminary proposals must be submitted to the public body, which must not be less than 30 days.” He pointed out the deleted language stated “30 days or no more than 60days.” The Senator asked how long it would take to prepare a proposal for a design-build project. Mr. Holloway said the time for preparation varied from project to project depending upon the type of construction the project involved.

Chairman O'Connell called for additional testimony from those in support of the proposed legislation as written. Warren B. Hardy III, Lobbyist, Associated Builders and Contractors, testified he was in support of the measure as presented. However, he noted, his organization was not opposed to the proposed amendment. Mr. Hardy said he particularly supported a compromise lowering the monetary threshold for public works projects and considered $2.5 million to be too high a threshold, whereas the proposed threshold of $250,000 was a reasonable amount. Mr. Hardy concluded by stating members of his group supported the sliding scale compromise in the proposed amendment as well as the proposal to limit construction to one public works project per year.

Senator Lawrence E. Jacobsen, Western Nevada Senatorial District, was the next to testify on the measure. He explained his personal experiences had demonstrated S.B. 61 was legislation with a great deal of merit. He expressed his concern that rural Nevadans did not always have adequate funds to pay construction costs for large projects. The Senator said he considered the proposed legislation to be very fair to smaller communities because it was cost-effective and provided autonomy to rural citizens throughout the state.

Chairman O'Connell entered into the record a letter from Assemblywoman Bonnie Parnell (Exhibit E) which explained that throughout the United States, in both the private and the public sectors, the design-build method of construction was a-tried-and-proved method of team contracting. Chairman O'Connell continued paraphrasing Assemblywoman Parnell’s letter which stated governments needed the ability to make business decisions that reflected the most efficient and effective possible methods of providing services to their communities. She considered the design-build method to be one of the best tools available for building cost-effective and high-quality public works projects.

Mary C. Walker, Lobbyist, Carson City, Douglas County, Lyon County, Carson- Tahoe Hospital, and Nevada Recreation and Parks Society, appeared before the committee in support of the measure. Ms. Walker introduced A.R. (Al) Shankle, President, Al Shankle Construction, and former president of the California branch of AGC, saying Mr. Shankle had been instrumental in establishing the design-build method of construction in California. Ms. Walker also introduced Tom Metcalf, Lobbyist, Builders Association of Western Nevada, and Chairman of the Carson-Tahoe Hospital Board of Trustees. Ms. Walker said both were prepared to testify in support of the proposed legislation.

Ms. Walker, reading from her prepared statement (Exhibit F), noted the new legislation would clean up unnecessary and counterproductive language in current statutes pertaining to the administrative process of applying for and administering design-build public works projects. She presented an example of unproductive language which pertained to the requirement that current law required 12 public notices to be posted before a project could be awarded, which she said would take approximately 2 months to achieve. Therefore, she said, one of the best aspects of the measure was that it would expedite the construction of public works projects. In addition to saving time, the method would reduce the cost of construction projects.

Continuing her testimony, Ms. Walker stated the intent of the proposed legislation was to allow a public body in any county to contract with a design-build team once each fiscal year if the estimated cost of the public work is at least $250,000 but less than $100 million if the project is a water or sewage treatment facility, and at least $250,000 but less than $300 million for any other type of public works. The design-build contracting method would be an alternative to the process of taking the lowest bid, but it would not replace the bidding process, nor would it prohibit labor union members from working on design-build projects, Ms. Walker said, adding the method also proved to be beneficial to rural areas, made good business sense, and the statutory exemptions in the current law would be good for the procurement process. She explained the design-build method was a proven method of construction used throughout the United States. Also, she said, both private and public sectors supported a lower threshold amount of $250,000 for design-build projects.

Ms. Walker said limits should not be set overly high in smaller communities because lower thresholds eliminated discrimination against rural areas statewide. Referring to her handout, she explained 45 percent of public works construction projects were in the $25,000 to $250,000 range, 15 percent were in the $250,000 to $500,000 range, and 12 percent of the projects were in the $500,000 to $1 million range. Cumulatively, 95 percent of the projects were in the $5 million and lower range which left only 5 percent of the projects available for design-build team construction. For that reason, she stated, it was important to lower the threshold, and thus allow more projects to qualify for design-build construction.

Senator Neal asked for an explanation of the term “design-build.” Ms. Walker explained the term referred to an alternative method of construction bidding which differed from the conventional method of accepting the lowest bid offered in the bidding process. Currently in Nevada, the low-bid method was the only method allowed. The design-build method of contracting would provide an alternative to the low-bid method. In the case of design-build contracting, a team would be hired that included a contractor, an architect, and an engineer. Ms. Walker said the method was not a new concept, but it was new to Nevada.

However, added Ms. Walker, there were two changes in the bill that were not germane to the design-build method, particularly those sections that dealt with energy retrofitting. The statutory exemptions in the law facilitated the procurement of energy conservation in a controlled, effective, timely, and informal manner necessitated by the nature of the work. She concluded her presentation by stating that considering the current energy crisis, the present time was not the right time to complicate ways of conserving energy. She said it would be necessary to amend the measure to restore the exemptions in NRS 338.1906 and 338.1907 for energy retrofitting.

A.R. (Al) Shankle, President, Al Shankle Construction, was the next to testify in support of the measure. He stated design-build contracting had been a method successfully used for a long time with a proven record of providing substantial savings to governmental agencies. He explained the design-build team method was prevalent in the private sector and worked equally well for small and large projects. Mr. Shankle said in 1986 he was instrumental in bringing the method to popular use in California.

Tom Metcalf, Lobbyist, Builders Association of Western Nevada, and Carson-Tahoe Hospital Board of Trustees, was the next to testify in support of the measure. He introduced himself as the chairman of the board of trustees for Carson-Tahoe Hospital, immediate past president of the Builders Association of Western Nevada, and a licensed commercial building contractor. He said he performed approximately 75 percent of his construction work using the design-build method and found it to be an excellent contracting method. Mr. Metcalf said the method had been successfully used for decades in other parts of the country and he advocated the use of the method for governmental construction projects. Mr. Metcalf speculated that the restriction of limiting design-build projects to only one per year would be removed once the method had been put in place in Nevada and proved to be superior to the low-bid method for contracting certain public works projects.

Chairman O'Connell asked if all concerned entities had agreed to the compromise, to which Ms. Walker responded in the negative. She explained the design-build method was a successful and viable alternative to the existing low-bid contracting method, but said the establishment of threshold limits was a very important matter that needed to be determined in order to satisfy all concerned parties. Ms. Walker suggested a legislative oversight committee be called upon to continue discussion through the next biennium.

Senator Raggio asked if more than one project could be considered for Clark County. Ms. Walker stated her suggestion would be that counties other than Clark should develop only one project per year.

Senator Neal asked if design-build projects would be subject to all regularly enforced codes and inspections, to which Ms. Walker responded in the affirmative.

Jim Keenan, Purchasing Agent, Purchasing, Douglas County, and member of Nevada Public Purchasing Study Commission, explained 2 years ago he had testified in support of the current design-build legislation for two reasons. He said those reasons were that design-build was a legitimate method of procurement and a valuable tool for purchasing managers. The second reason, he said, was the program was a test program that warranted fair consideration. He added that the testimony last session provided by his agency also included several reservations pertaining to some of the procedural requirements in the measure.

Mr. Keenan said S.B. 61 was good legislation because it removed a number of obstacles previously encountered. He considered $5 million to be a great deal of money for small, rural governments. He said he agreed with Ms. Walker in that he and his colleagues were not comfortable experimenting with testing programs that cost $250,000 or $500,000 of taxpayer money and he certainly was not willing to experiment with $5 million. He said he and the study commission unanimously endorsed the design-build aspects of the measure.

However, Mr. Keenan added, he was concerned because the measure included two provisions that he did not support. Both provisions, containing similar NRS references that had been struck through were contained in section 1 on page 1, lines 2 and 3, and again in section 3, page 5, lines 29 and 30 of S.B. 61. Mr. Keenan noted the lines crossed out in those two sections effectively deleted statutory exemptions contained in NRS 338.1906 and 338.1907 regarding energy retrofitting. Those statutory exemptions in current law facilitated the procurement of energy conservation in a controlled, effective, and timely manner necessitated by the nature of the work, he noted. The result of deleting that language appeared to demonstrate energy retrofitting had become a typical public works procurement that required adherence to the formal bidding process and prefiling approved plans, along with other administrative requirements unsuitable for this type of work. He concluded by stating conservation of energy was presently a very important concern. Mr. Keenan provided the committee with a copy of his statement (Exhibit G).

Committee Counsel Kimberly Marsh Guinasso pointed out sections 1 through 4 of the proposed legislation were considered “conforming changes.” She explained the provisions regarding retrofitting would sunset in 2013. In response to Ms. Marsh Guinasso’s explanation, Mr. Keenan said he had no objection to the proposed measure.

Daniel K. O’Brien, Manager, State Public Works Board, explained his position required him to be responsible for the construction of millions of dollars worth of state facilities, and this responsibility obligated him to utilize all possible tools available in order to complete projects on time, within budget, and in the most cost-efficient manner possible. Mr. O’Brien explained some of the tools necessary to complete his tasks satisfactorily included the design-build method of construction along with prequalification of bidders and determination of best bid, rather than depending solely on the low bid. He emphasized that the use of the design-build method of contracting should be a decision made by the governmental entities involved in each individual public works project. Mr. O’Brien said there were no good reasons for setting limits; however, if limits had to be set, one project per year was too restrictive. He expressed his support of the proposed legislation. Mr. O’Brien submitted his formal statement for the record (Exhibit H).

Robin Keith, Lobbyist, Nevada Rural Hospital Project Foundation, commented that the foundation, which represents all of the state’s rural, nonprofit hospitals, has goals that include supporting legislation that would provide economic efficiency to hospitals in small communities. She said design-build construction was good business policy because it would save rural communities money. Ms. Keith expressed her support of the proposed compromise.

Ms. Keith continued her testimony in support of S.B. 61 by reading into the record the written statement of Kathy Ancho, Administrator of Battle Mountain General Hospital, in support of the proposed legislation. Ms. Ancho stated the measure saved money and did not limit accountability inherent in spending tax money. In her statement, she maintained current statutes for public works projects were difficult to accommodate, lacking in flexibility, limiting in their ability to benefit rural communities, and not economically sound. In conclusion, Ms. Ancho urged the senators to support the measure.

Shawn Wiscombe, Administrator, Grover C. Dils Medical Center, was the next to testify in support of the measure and the compromise language proposed. He stated the proposed legislation would greatly enhance the possibilities for hospitals and other public works projects throughout Nevada to perform much needed improvements to existing structures as well as develop new construction projects, and would not compromise established building requirements. Mr. Wiscombe concluded by stating the measure would allow local building departments the opportunity to select the most economical techniques available for their taxpayers’ dollars.

The next advocate of the proposed legislation to address the committee was Bill M. Welch, Lobbyist, Nevada Hospital Association. Mr. Welsh stated the main reason for his support of S.B. 61 was that it would be good for rural hospitals throughout the state because it would help provide health care opportunities to rural citizens in an ever-growing and continually changing environment. He said design-build construction would bring outpatient facilities to less-populated communities, as well as assist in the renovation of rural hospitals.

Senator Neal asked if design-build construction would reduce costs, to which Mr. Welch responded in the affirmative. The Senator continued his questioning by asking if the design-build method would totally eliminate the bidding process. Mr. Welch responded in the negative, adding there were many processes in existing law that would provide for continuation of the bidding process in other governmental programs. Ms. Keith explained that implementing the design-build methodology would not eliminate the bidding process. Senator Neal then asked if labor union members would be restricted from working on design-build projects. Ms. Keith stated she knew of nothing in the proposed legislation that would preclude labor union membership from working with a design-build team.

Susan Martinovich, P.E., Assistant Director, Engineering Division, Nevada Department of Transportation (NDOT), testified in support of the proposed legislation. She said her agency supported S.B. 61 because it was another tool that could be used to meet the needs of the people of Nevada. She suggested two small changes to the proposed measure. Ms. Martinovich pointed out section 9 of the proposed legislation amended NRS 338.1727 and section 14 amended NRS 408.3886. She said language in the measure suggested the cost of both the design and construction of a proposed public works project should be a factor in selecting a design-build team. She said a relative weight of 30 percent had been assigned to this factor; however, she suggested the weight of that factor should have more flexibility. Ms. Martinovich said cost should always be a factor in the selection of a design-build public works project, but placing a specific weight on that factor limited the discretion of an agency to identify appropriate criteria for various projects. She suggested such limitations were in conflict with the initial reason for pursuing the design-build process.

Senator Raggio asked for clarification regarding the 30 percent relative weight factor for cost analysis. Ms. Martinovich explained she would support lowering the percentage rate to promote flexibility in the contracting process.

Scott Morgan, Director, Community Services/Parks and Recreation Department, Douglas County, said design-build contracting capitalized on competition and created an inspired working relationship between architects, engineers, and contractors, as well as minimizing the financial burdens to municipalities and taxpayers. Mr. Morgan asserted that over the years, his working relationships with design-build teams had been very positive, inspired, and conducive to promoting teamwork to get projects completed in an efficient and cost-effective manner.

A written statement from Kathie Fralick, vice president and owner of Sierra Nevada Construction Incorporated, was offered into the record (Exhibit I) without being read before the committee. In her written statement, Ms. Fralick asserted her objection to reducing the limit for design-build projects. Her reason for the objection was because she considered design-build team contracting to be a complex arrangement necessary only for very large projects. Ms. Fralick considered the design-build method potentially harmful to smaller contractors who might not have adequate staff or financial resources to compete in the bidding process. She concluded her written statement by expressing further concern that the objectivity provided in the bid process would be replaced by the subjectivity of those who were considering bid proposals.

Chairman O'Connell determined further discussions would be necessary to fully contemplate the measure. She explained additional meetings would be held starting on February 21, 2001, to continue discussing the proposed legislation and suggested amendments. The Chairman encouraged all concerned to continue to attend meetings and offer opinions regarding the proposed legislation. She called for testimony from those who were in opposition to S.B. 61, and seeing there was none, closed the discussion on the proposed legislation.

Chairman O'Connell opened the hearing on introductions of bill draft requests (BDR).

Mr. Leavitt was called upon by the Chairman to introduce BDR 32-125.

BILL DRAFT REQUEST 32-125: Makes various changes concerning tax imposed

on revenues from rental on transient lodging. (Later introduced as Senate Bill

122.)

SENATOR RAGGIO MOVED FOR THE COMMITTEE INTRODUCTION OF BDR 32-125.

SENATOR O'DONNELL SECONDED THE MOTION.

THE MOTION PASSED. (SENATOR TITUS WAS ABSENT FOR THE VOTE.)

*****

Mr. Leavitt was also called upon to introduce BDR 30-699.

BILL DRAFT REQUEST 30-699: Makes various changes concerning municipal obligations and procedures of debt management commissions. (Later introduced as Senate Bill 123.)

SENATOR RAGGIO MOVED FOR COMMITTEE INTRODUCTION OF BDR 30-699.

SENATOR O’DONNELL SECONDED THE MOTION.

THE MOTION PASSED. (SENATOR TITUS WAS ABSENT FOR THE VOTE.)

*****

Mr. Leavitt requested introduction of BDR 32-894.

BILL DRAFT REQUEST 32-894: Requires allocation and remittance of money collected from certain taxes to be made directly to incorporated cities. (Later introduced as Senate Bill 124.)

SENATOR NEAL MOVED FOR COMMITTEE INTRODUCTION OF BDR 32-894.

SENATOR PORTER SECONDED THE MOTION.

THE MOTION PASSED. (SENATOR TITUS WAS ABSENT FOR THE VOTE.)

*****

Mr. Leavitt then requested introduction of BDR 31-898.

BILL DRAFT REQUEST 31-898: Makes various changes to provisions relating to financial reporting of local governments. (Later introduced as Senate Bill 125.)

SENATOR NEAL MOVED FOR COMMITTEE INTRODUCTION OF BDR 31-898.

SENATOR RAGGIO SECONDED THE MOTION.

THE MOTION PASSED. (SENATOR TITUS WAS ABSENT FOR THE VOTE.)

*****

There being no further business before the committee, the Chairman adjourned the meeting at 4:47 p.m.

RESPECTFULLY SUBMITTED:

Sharon T. Spencer,

Committee Secretary

APPROVED BY:

Senator Ann O'Connell, Chairman

DATE: